Opinion Editorial | |
| Monday, June 8, 1998 | |
Future Tax Burden Will Remain High |
Although the United States now has the heaviest tax burden in its history,
as measured by federal revenue as a share of the gross domestic product
(GDP), neither Congress nor the White House seem prepared to support anything
more than a minuscule tax cut this year. Indeed, it appears likely that
they will actually enact a net tax increase this year once the tobacco bill
is completed. The imposition of a major tax increase at a time when the
federal budget is already in substantial surplus is utterly unjustified
and, as a recent Senate Budget Committee report notes, unprecedented. According to the Department of Commerce, in 1992 the federal government
took 19.2 percent of GDP, a figure that was already well above the postwar
average of 18.5 percent. Since Bill Clinton's election, however, the federal
government's share has increased every year and reached 21.3 percent of
GDP last year. In no other year in American history, including during World
War II, did the government claim more of the nation's total output. A new long-term budget forecast from the Congressional Budget Office
(CBO) indicates that we can expect taxes to remain at historically high
levels for as far as the eye can see. Revenues are estimated to stay at
21 percent of GDP until at least the year 2000, and will not fall below
20 percent of GDP for the next 50 years. The tobacco bill will add another
0.2 percent to these figures. The principal reason for this rising tax burden is that the 1990 and
1993 tax increases made the tax system more progressive. As a consequence,
the federal government now takes a larger share of any increase in income.
And this is true not just for individuals, but for the economy as a whole.
Thus, the government now takes twice as much out of the annual increase
in GDP as it did in 1992
(see figure). Eventually the higher aggregate tax burden translates into higher taxes
for most Americans. According to the CBO, the effective federal income
tax rate (taxes paid as a share of income) has risen from 12.9 percent in
1992 to 14 percent in 1996. Every income group above $30,000 has seen an
increase in its tax rate. And the increase undoubtedly would have been
even greater if it also included Social Security payroll taxes, because
73 percent of all individuals and families pay more payroll taxes than income
taxes. Congress is now considering a $100 billion tax cut over 5 years. But
we need a tax cut of at least $100 billion per year just to keep the tax
burden from rising -- more if the tobacco bill passes. Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis,
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